Supreme Court judgment reveals how decision for demonetisation was taken in 48 hours

The Supreme Court on Monday held that the 2016 demonetisation exercise did not suffer from any flaws in the decision-making process..In order to arrive at this conclusion, the four judges who upheld demonetisation - Justices S Abdul Nazeer, BR Gavai, AS Bopanna and V Ramasubramanian - scrutinised records which elucidated the steps leading up to the final notification..The records were produced by the Central government and the Reserve Bank of India (RBI) on the petitioners’ insistence that the court would not be able to satisfy itself without examining those documents. These records showed how the decision for demonetisation was taken. .- The Central government initiated the proposal for demonetisation and sought the RBI's opinion on November 7, 2016.- Following this, a meeting of the RBI's central board was held immediately on the next day - November 8, 2016 at 5 pm.- The central board of directors governs the affairs of the RBI. The board is appointed by the Government of India in keeping with the RBI Act.Within hours, a recommendation of the central board was sent to the Centre and on the same date itself, the Prime Minister announced the decision on national television at 8 pm..The following documents considered by the apex court: .- The November 7, 2016 communication from the Finance Ministry to the RBI Governor.This communication shared concerns regarding infusion of Fake Indian Currency Notes (FICN) and generation of black money.It stated that FICN was concentrated in denominations of Indian banknotes of ₹500 and ₹1,000. It also referred to the 2012 White Paper on Black Money by the Department of Revenue which referred to the growth in the size of the country’s shadow economy and that a parallel shadow economy was corroding and eating into the vitals of the country’s economy.Further, the communication pointed to the constitution of a Special Investigation Team (SIT) headed by two former judges of the Supreme Court which made strong observations against cash economy.Thus, the communication advised the central board to take note and consider making necessary recommendations.It also requested the RBI to prepare a draft scheme to implement the recommendations in a non-disruptive manner with as little inconvenience to the public and business entities as possible..- The minutes of the November 8, 2016 meeting held by the RBI central board and the recommendations by RBIThe minutes showed that the Finance Ministry’s communication dated communication dated November 7, 2016 was placed before the central board by the Deputy Governor.It led to an elaborate discussion on the proposal. The board considered the pros and cons of the measure.The central board also considered that the proposed step presents a big opportunity to take the process of financial inclusion further by incentivizing the use of electronic modes of payment, so that people see the benefits of bank accounts and electronic means of payment over use of cash.The central board further took into consideration that the matter had been under discussion between the Central government and the RBI for the past six months during which most of the issues raised in the meeting were considered.After detailed deliberations, the board resolved to recommend the demonetisation exercise.The minutes also showed that eight directors were present in the meeting whereas the quorum for the meeting was four directors.Thereafter, the deputy governor, by communication the very same day i.e November 8, 2016, informed the Secretary to Department of Economic Affairs, Ministry of Finance, Government of India about the above recommendations of the central board. Further, a draft scheme for implementation of the same was also enclosed along with the said recommendations..- The note for consideration during the cabinet meeting dated November 8, 2022.The note for the cabinet contained details about the relevant data available as per the Economic Survey for 2014-15 and 2015- 16 and the report of the Intelligence Bureau with regard to infusion of FICN and generation of black money.The note also contained the details with regard to the 2012 White Paper on Black Money.Further, it had details with regard to the report of the SIT headed by two former Judges of the Supreme Court and their recommendations.It also considered the recommendation of the RBI..The decision of the central board was conveyed to the government the very same day i.e. November 8 and the Prime Minister announced the decision to demonetise that very evening. .The petitioners had argued before the that the Central government's decision-making process was deeply flawed since a reverse mechanism was adopted where the Central government initiated the proposal.It was their contention that unless the documents are perused, it would remain unclear whether the court took into consideration relevant factors or eschewed irrelevant factors.It was also submitted that the process was pre-meditated and rushed, which depicted a non-application of mind and was deeply and fatally flawed.Finally, it was argued that the central board's quorum was incomplete. These contentions were turned down by the Court. .The fifth judge, Justice BV Nagarathna, however passed a dissenting verdict opining that the since the proposal arose from the Centre, it ought to have been carried out by enacting a law or plenary legislation.It was also her opinion that the RBI acted at the behest of the Central government and did not render an independent opinion. .Read more about the majority judgment here.Read more about the dissenting opinion here..[Read Judgment]